Today, Wednesday, April 26, 2017, White House officials outlined President Trump’s tax plan proposals, and noted that the proposals would be the “biggest tax cut” in U.S. history.
White House chief economic advisor Gary Cohn and Treasury Secretary Steven Mnuchin summarized the plan to reporters at the White House. The announced tax plan follows the proposal President Trump outlined as a candidate, according to the White House.
The proposal will dramatically reduce the corporate tax rate to 15 percent from 35 percent.
With regard to individual income taxes, Trump’s plan will cut the number of income tax brackets from seven to three, with a top rate of 35 percent and lower rates of 25 percent and 10 percent. Left unclear are what income ranges will fall under those brackets.
Further, with regard to individual income taxes, the plan calls for the elimination of all tax deductions except for the mortgage and charitable contribution deductions.
The plan eliminates the estate tax, sometimes referred to as the “death tax.” Gary Cohn said that the repeal of the estate tax will help privately-held businesses and American farmers. As currently structured, the estate tax affects only a very small percentage of Americans.
Mnuchin said the U.S. would go to a “territorial” tax system. Though further details were not forthcoming, such systems generally would exclude most or all of the income that businesses earn overseas.
Most independent analyses of Trump’s campaign tax plan argue that it will balloon the budget deficit over time even after higher tax revenue from greater economic growth is factored in. Mnuchin did not say if the plan would be “revenue neutral,” meaning whether it would result in a larger U.S. budget deficit. He stated, however, that the plan would “pay for itself” through economic growth.
Congressional reaction, particularly from the Senate, will be interesting. House Speaker Paul Ryan stated he does not think President Trump is bypassing Congress by releasing the proposal in a press briefing, adding that Congress and the White House are working to reach consensus on a plan.
This first look at this breaking news will be updated as details become available. Please check back for updates.
Article brought to you by:
Neil V. Birkhoff
Chair, Tax Practice Group
Woods Rogers PLC